Investing.com -- On March 28, 2025, S&P Global Ratings upgraded all of its ratings on Welltower (NYSE: WELL ) Inc., including its issuer credit rating, to ’A-’ from ’BBB+’. This decision was driven by the company’s reduced leverage and strong operating performance. The outlook for Welltower remains stable.

Welltower Inc. has significantly strengthened its balance sheet in recent years by funding growth almost entirely with equity. The company is expected to continue to improve its key credit metrics over the next two years, with debt to EBITDA predicted to decline to the low-4x area and fixed-charge coverage ( FCC (BME: FCC )) expected to rise to the mid- to high-5x area.

The company’s senior housing operating property (SHOP) assets are forecasted to continue generating outsized same-property net operating income (NOI) growth in both 2025 and 2026. This growth is expected to lead to additional modest improvement in the company’s key credit metrics.

Welltower’s portfolio is benefiting from robust sector tailwinds, including a growing number of people aged 80 and older. This demographic is expected to increase by a compound annual growth rate of 4.8% through 2030 and 4.0% through 2050. Given the company’s significant exposure to high-quality and well-operated SHOP assets, it is well-positioned to benefit from this demographic trend.

The company’s strong operating performance is expected to drive additional improvement to the credit metrics over the next two years. From 2021 through 2024, Welltower made $18.3 billion in total investments (net of dispositions), including $5.4 billion in 2024. Over that same time period, Welltower issued $19.4 billion of common stock, significantly reducing leverage in the process. S&P Global Ratings-adjusted debt to EBITDA was 4.6x at year-end, down from 5.9x one year prior and from a peak of 8.1x at the end of 2021.

S&P Global Ratings expects the company to continue funding its growth with a healthy proportion of equity. Strong expected operating performance should lead to further improvement to Welltower’s key credit metrics given the strong projected organic growth to EBITDA. Over the next two years, a modest improvement in adjusted debt to EBITDA to the low-4x area is projected, with fixed-charge coverage improving to the mid- to high-5x area.

The stable outlook on Welltower is based on the view that the company’s SHOP assets will continue to exhibit significant sequential improvement, generating robust same-property NOI growth in both 2025 and 2026. This strong expected operating performance, combined with investments funded with a healthy proportion of equity, is expected to result in a modest improvement in Welltower’s adjusted debt to EBITDA to the low-4x area over the next 12 to 24 months. FCC is projected to improve materially from EBITDA growth, rising to the mid- to high-5x area over the next two years.

The ratings could be lowered if credit metrics deteriorate or favorable operating trends reverse. However, a rating increase could occur if Welltower commits to more conservative financial policies and operating performance remains healthy.

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